K.U.Leuven - Departement toegepaste economische wetenschappen
DTEW Research Report 0037 pages:1-24
We study how decision makers learn to improve performance across repeated budget allocation decisions. The costing system they use should be able to provide information that is of incremental value over mere outcome feedback. We report an experiment demonstrating that customer profitability analysis (CPA) using activity based costing facilitates learning of the most appropriate allocation of a marketing budget among customers. In a difficult learning environment, participants receiving CPA information made closer-to-optimal budget allocation decisions, resulting in higher cumulative profits compared to subjects receiving traditional accounting reports. In easier learning environments, CPA yielded a smaller additional benefit over a traditional costing system combined with outcome feedback.